CRA Insurance News – South Africa
The economic crisis affecting all South Africans due to the pandemic and lockdown has resulted in inquiries into the cancellation of car insurance rising.
The effects are already becoming visible in many sectors. Not only are many companies affected, reducing work hours or closing completely, but consumers have also decided to start cutting their budgets.
Part of these efforts to reduce budgets has led to a rise in consumers consulting on the cancellation of their insurance — particularly car insurance. However, experts warn that this method of saving money is a highly risky financial technique.
“From a risk perspective, being uninsured means that you will have to pay out-of-pocket should the need arise. This may be a cost you cannot cover, and the repairs to your vehicle will not be done,” said Shaun Neuhoff, Managing Director of AA Insurance Supermarket.
According to Neuhoff, the percentage of insured cars is less than 35%, which means that on South African roads more than 65% of cars are uninsured.
Neuhoff notes: “What this means is that if you are uninsured, you will have to rely on the other person’s insurance to cover you in the event of a crash, if the other person has insurance. And — given the numbers — this is unlikely.”
Reduce costs by downgrading rather than cancelling
However, to reduce costs, consumers are advised to not completely cancel their coverage, but rather reduce the cost of it.
Niehoff recommends investigating the costs of auto insurance to help reduce costs without jeopardising coverage.
He adds that it’s possible to change to cheaper insurance while maintaining the same coverage. However, he also says that before changing coverage insurance, certain measures can be taken in order to save money.
There are several reasons why consumers, when aiming to reduce costs, first think about car insurance. The main reason, at present, is that the number of cars on South African roads is reduced as a result of lockdown regulations, with many people working remotely.
For that reason, vehicle owners feel that it is no longer a primary need.
Before cancelling your insurance coverage or changing insurance companies, you can opt to downgrade your coverage category.
If you have full coverage, you can get a downgrade to comprehensive coverage with reduced premiums. This can be very helpful if you are a low mileage driver.
Another way of reducing costs on insurance coverage is to change from a full coverage category to coverage that pays only for total loss and third-party claims.
The risk that vehicle owners would be taking when choosing this option is that the insurance, in the case of accidental damage, will not cover the repairs.
To this extent, you would end up spending even more money to repair these damages if you want to use your car on South African roads again.
You could also downgrade to an even lower category than comprehensive coverage, such as downgrading to a third-party product or fire and theft coverage.
However, this coverage only covers the cost of claiming the other person’s vehicle if they are involved in a crash, or if the vehicle is stolen and is not recovered or irreparably damaged in a fire.
That said, experts view car insurance as a necessity that protects you financially when disaster strikes.
Feature image: Supplied
Article Credit To MEME Burn.